SECOND DIVISION Together with Keppel's lease rights and option to purchase, Lusteveco warranted not to sell the
land or assign its rights to the land for the duration of the lease unless with the prior written
G.R. No. 202050, July 25, 2016
PHILIPPINE NATIONAL OIL COMPANY AND PNOC DOCKYARD & ENGINEERING
CORPORATION, Petitioners, v. KEPPEL PHILIPPINES HOLDINGS, INC., Respondent.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari filed under Rule 45 of the Rules of Court,
appealing the decision dated 19 December 20111 and resolution dated 14 May 20122 of the
Court of Appeals (CA) in CA-G.R. CV No. 86830. These assailed CA rulings affirmed in toto the
decision dated 12 January 20063 of the Regional Trial Court (RTQ of Batangas City, Branch 84, in
Civil Case No. 7364.
THE FACTS
The 1976 Lease Agreement and Option to Purchase
Almost 40 years ago or on 6 August 1976, the respondent Keppel Philippines Holdings,
Inc.4 (Keppel) entered into a lease agreement5 (the agreement) with Luzon Stevedoring
Corporation (Lusteveco) covering 11 hectares of land located in Bauan, Batangas. The lease was
for a period of 25 years for a consideration of P2.1 million.6 At the option of Lusteveco, the rental
fee could be totally or partially converted into equity shares in Keppel.7chanrobleslaw
At the end of the 25-year Jease period, Keppel was given the "firm and absolute option to
purchase8the land for P4.09 million, provided that it had acquired the necessary qualification
to own land under Philippine laws at the time the option is exercised. 9 Apparently, when the
lease agreement was executed, less than 60% of Keppel's shareholding was Filipino-owned,
hence, it was not constitutionally qualified to acquire private lands in the
country.10chanrobleslaw
If, at the end of the 25-year lease period (or in 2001), Keppel remained unqualified to own
private lands, the agreement provided that the lease would be automatically renewed for
another 25 years.11Keppel was further allowed to exercise the option to purchase the land up to
the 30th year of the lease (or in 2006), also on the condition that, by then, it would have
acquired the requisite qualification to own land in the Philippines.12chanrobleslaw
consent of Keppel.13 Accordingly, when the petitioner Philippine National Oil
Corporation14 (PNOC) acquired the land from Lusteveco and took over the rights and obligations
under the agreement, Keppel did not object to the assignment so long as the agreement was
annotated on PNOC's title.15 With PNOC's consent and cooperation, the agreement was recorded
as Entry No. 65340 on PNOC's Transfer of Certificate of Title No. T-50724.16chanrobleslaw
The Case and the Lower Court Rulings
On 8 December 2000, Keppel wrote PNOC informing the latter that at least 60% of its shares
were now owned by Filipinos17 Consequently, Keppel expressed its readiness to exercise its
option to purchase the land. Keppel reiterated its demand to purchase the land several times,
but on every occasion, PNOC did not favourably respond.18chanrobleslaw
To compel PNOC to comply with the Agreement, Keppel instituted a complaint for specific
performance with the RTC on 26 September 2003 against PNOC.19 PNOC countered Keppel's
claims by contending that the agreement was illegal for circumventing the constitutional
prohibition against aliens holding lands in the Philippines.20 It further asserted that the option
contract was void, as it was unsupported by a separate valuable consideration.21 It also claimed
that it was not privy to the agreement.22chanrobleslaw
After due proceedings, the RTC rendered a decision23in favour of Keppel and ordered PNOC to
execute a deed of absolute sale upon payment by Keppel of the purchase price of P4.09
million.24chanrobleslaw
PNOC elevated the case to the CA to appeal the RTC decision.25cralawred Affirming the RTC
decision in toto, the CA upheld Keppel's right to acquire the land.26 It found that since the option
contract was embodied in the agreement - a reciprocal contract - the consideration was the
obligation that each of the contracting party assumed.27 Since Keppel was already a Filipino-
owned corporation, it satisfied the condition that entitled it to purchase the land.28chanrobleslaw
Failing to secure a reconsideration of the CA decision,29 PNOC filed the present Rule 45 petition
before this Court to assail the CA rulings.
THE PARTIES' ARGUMENTS and THE ISSUES
PNOC argues that the CA failed to resolve the constitutionality of the agreement. It contends that
the terms of the agreement amounted to a virtual sale of the land to Keppel who, at the time of
the agreement's enactment, was a foreign corporation and, thus, violated the 1973 Constitution.
Specifically, PNOC refers to (a) the 25-year duration of the lease that was automatically
renewable for another 25 years30; (b) the option to purchase the land for a nominal consideration
of P100.00 if the option is exercised anytime between the 25th and the 30th year of the lease 31;
and (c) the prohibition imposed on Lusteveco to sell the land or assign its rights therein during
the lifetime of the lease.32Taken together, PNOC submits that these provisions amounted to a
virtual transfer of ownership of the land to an alien which act the 1973 Constitution prohibited.
PNOC claims that the agreement is no different from the lease contract in Philippine Banking
Corporation v. Lui She,33 which the Court struck down as unconstitutional. In Lui She, the lease
contract allowed the gradual divestment of ownership rights by the Filipino owner-lessor in
favour of the foreigner-lessee.34The arrangement in Lui She was declared as a scheme designed
to enable the parties to circumvent the constitutional prohibition.35 PNOC posits that a similar
intent is apparent from the terms of the agreement with Keppel and accordingly should also be
nullified.36chanrobleslaw
PNOC additionally contends the illegality of the option contract for lack of a separate
consideration, as required by Article 1479 of the Civil Code.37 It claims that the option contract is
distinct from the main contract of lease and must be supported by a consideration other than
the rental fees provided in the agreement.38chanrobleslaw
On the other hand, Keppel maintains the validity of both the agreement and the option contract
it contains. It opposes the claim that there was "virtual sale" of the land, noting that the option is
subject to the condition that Keppel becomes qualified to own private lands in the
Philippines.39 This condition ripened in 2000, when at least 60% of Keppel's equity became
Filipino-owned.
Keppel contends that the agreement is not a scheme designed to circumvent the constitutional
prohibition. Lusteveco was not proscribed from alienating its ownership rights over the land but
was simply required to secure Keppel's prior written consent.40 Indeed, Lusteveco was able to
transfer its interest to PNOC without any objection from Keppel.41chanrobleslaw
Keppel also posits that the requirement of a separate consideration for an option to purchase
applies only when the option is granted in a separate contract.42 In the present case, the option is
embodied in a reciprocal contract and, following the Court's ruling in Vda. De Quirino v.
Palarca,43 the option is supported by the same consideration supporting the main contract.
From the parties' arguments, the following ISSUES emerge:
chanRoblesvirtualLawlibraryFirst, the constitutionality of the Agreement, i.e., whether the terms
of the Agreement amounted to a virtual sale of the land to Keppel that was designed to
circumvent the constitutional prohibition on aliens owning lands in the Philippines.
Second, the validity of the option contract, i.e., whether the option to purchase the land given to
Keppel is supported by a separate valuable consideration.
If these issues are resolved in favour of Keppel, a third issue emerges - one that was not
considered by the lower courts, but is critical in terms of determining Keppel's right to own and
acquire full title to the land, i.e., whether Keppel's equity ownership meets the 60% Filipino-
owned capital requirement of trie Constitution, in accordance with the Court's ruling
in Gamboa v. Teves.44chanrobleslaw
THE COURT'S RULING
I. The constitutionality of the Agreement
The Court affirms the constitutionality of the Agreement.
Preserving the ownership of land, whether public or private, in Filipino hands is the policy
consistently adopted in all three of our constitutions.45 Under the 1935,46 1973,47 and
198748 Constitutions, no private land shall be transferred, assigned, or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
Consequently, only Filipino citizens, or corporations or associations whose capital is 60% owned
by Filipinos citizens, are constitutionally qualified to own private lands.
Upholding this nationalization policy, the Court has voided not only outright conveyances of land
to foreigners,49: but also arrangements where the rights of ownership were gradually transferred
to foreigners.50 In Lui Shui,51 we considered a 99-year lease agreement, which gave the foreigner-
lessee the option to buy the land and prohibited the Filipino owner-lessor from selling or
otherwise disposing the land, amounted to -
a virtual transfer of ownership whereby the owner divests himself in stages not only of the right
to enjoy the land (Jus possidendi, jus utendi, jus fruendi, and jus abutendi) but also of the right to
dispose of it (jus disponendi) rights the sum total of which make up ownership.52 [Emphasis
supplied]
In the present case, PNOC submits that a similar scheme is apparent from the agreement's
terms, but a review of the overall circumstances leads us to reject PNOC's claim.
The agreement was executed to enable Keppel to use the land for its shipbuilding and ship
repair business.53 The industrial/commercial purpose behind the agreement differentiates the
present case from Lui She where the leased property was primarily devoted to residential
use.54 Undoubtedly, the establishment and operation of a shipyard business involve significant
investments. Keppel's uncontested testimony showed that it incurred P60 million costs solely for
preliminary activities to make the land suitable as a shipyard, and subsequently introduced
improvements worth P177 million.55 Taking these investments into account and the nature of the
business that Keppel conducts on the land, we find it reasonable that the agreement's terms
provided for an extended duration of the lease and a restriction on the rights of Lusteveco.
We observe that, unlike in Lui She,56 Lusteveco was not completely denied its ownership rights
during the course of the lease. It could dispose of the lands or assign its rights thereto, provided
it secured Keppel's prior written consent.57 That Lusteveco was able to convey the land in favour
of PNOC during the pendency of the lease58 should negate a finding that the agreement's terms
amounted to a virtual transfer of ownership of the land to Keppel.
II. The validity of the option contract
II.A
An option contract must be supported by a separate consideration that is either clearly
specified as such in the contract or duly proven by the offeree/promisee.
An option contract is defined in the second paragraph of Article 1479 of the Civil
Code:ChanRoblesVirtualawlibrary
Article 14791 x x x An accepted promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.
An option contract is a contract where one person (the offeror/promissor) grants to another
person (the offeree/promisee) the right or privilege to buy (or to sell) a determinate thing at a
fixed price, if he or she chooses to do so within an agreed period.59chanrobleslaw
As a contract, it must necessarily have the essential elements of subject matter, consent, and
consideration.60 Although an option contract is deemed a preparatory contract to the principal
contract of sale,61 it is separate and distinct therefrom,62 thus, its essential elements should be
distinguished from those of a sale.63chanrobleslaw
In an option contract, the subject matter is the right or privilege to buy (or to sell) a determinate
thing for a price certain,64 while in a sales contract, the subject matter is the determinate thing
itself.65 The consent in an option contract is the acceptance by the offeree of the
offerer's promise to sell (or to buy) the determinate thing, i.e., the offeree agrees to hold
the right or privilege to buy (or to sell)within a specified period. This acceptance is different from
the acceptance of the offer itself whereby the offeree asserts his or her right or privilege to buy
(or to sell), which constitutes as his or her consent to the sales contract. The consideration in an
option contract may be anything of value, unlike in a sale where the purchase price must be in
money or its equivalent.66 There is sufficient consideration for a promise if there is any benefit to
the offeree or any detriment to the offeror.67chanrobleslaw
In the present case, PNOC claims the option contract is void for want of consideration distinct
from the purchase price for the land.68 The option is incorporated as paragraph 5 of the
Agreement and reads as
5. If within the period of the first [25] years [Keppel] becomes qualified to own land under the
laws of the Philippines, it has the firm and absolute option to purchase the above property for a
total price of [P-4,090,000.00] at the end of the 25th year, discounted at 16% annual for every
year before the end of the 25th year, which amount may be converted into equity of [Keppel] at
book value prevailing at the time of sale, or paid in cash at Lusteveco's option.
However, if after the first [25] years, [Keppel] is still not qualified to own land under the laws of
the Republic of the Philippines, [Keppel's] lease of the above stated property shall be
automatically renewed for another [25] years, under the same terms and conditions save for the
rental price which shall be for the sum of P4,090,000.00... and which sum may be totally
converted into equity of [Keppel] at book value prevailing at the time of conversion, or paid in
cash at Lusteveco's option.
If anytime within the second [25] years up to the [30th] year from the date of this agreement,
[Keppel] becomes qualified to own land under the laws of the Republic of the Philippines,
[Keppel] has the firm and absolute option to buy and Lusteveco hereby undertakes to sell the
above stated property for the nominal consideration of [P100.00.00]...69
Keppel counters that a separate consideration is not necessary to support its option to buy
because the option is one of the stipulations of the lease contract. It claims that a separate
consideration is required only when an option to buy is embodied in an independent
contract.70 It relies on Vda. de Quirino v. Palarca,71 where the Court declared that the option to
buy the leased property is supported by the same consideration as that of the lease itself: "in
reciprocal contracts [such as lease], the obligation or promise of each party is the consideration
for that of the other.72chanrobleslaw
In considering Keppel's submission, we note that the Court's ruling in 1969 in Vda. de Quirino v.
Palarcahas been taken out of context and erroneously applied in subsequent cases. In 2004,
through Bible Baptist Church v. CA73 we revisited Vda. de Quirino v. Palarca and observed that the
option to buy given to the lessee Palarca by the lessor Quirino was in fact supported by a
separate consideration: Palarca paid a higher amount of rent and, in the event that he does not
exercise the option to buy the leased property, gave Quirino the option to buy the improvements
he introduced thereon. These additional concessions were separate from the purchase price and
deemed by the Court as sufficient consideration to support the option contract.
Vda. de Quirino v. Palarca, therefore, should not be regarded as authority that the mere inclusion
of an option contract in a reciprocal lease contract provides it with the requisite separate
consideration for its validity. The reciprocal contract should be closely scrutinized and assessed
whether it contains additional concessions that the parties intended to constitute as a
consideration for the option contract, separate from that of the purchase price.
In the present case, paragraph 5 of the agreement provided that should Keppel exercise its
option to buy, Lusteveco could opt to convert the purchase price into equity in Keppel. May
Lusteveco's option to convert the price for shares be deemed as a sufficient separate
consideration for Keppel's option to buy?
As earlier mentioned, the consideration for an option contract does not need to be monetary
and may be anything of value.74 However, when the consideration is not monetary, the
consideration must be clearly specified as such in the option contract or clause. 75chanrobleslaw
In Villamor v. CA,76 the parties executed a deed expressly acknowledging that the purchase price
of P70.00 per square meter "was greatly higher than the actual reasonable prevailing value of
lands in that place at that time."77 The difference between the purchase price and the prevailing
value constituted as the consideration for the option contract. Although the actual amount of the
consideration was not stated, it was ascertainable from the contract whose terms evinced the
parties' intent to constitute this amount as consideration for the option contract. 78 Thus, the
Court upheld the validity of the option contract.79 In the light of the offeree's acceptance of the
option, the Court further declared that a bilateral contract to sell and buy was created and that
the parties' respective obligations became reciprocally demandable.80chanrobleslaw
When the written agreement itself does not state the consideration for the option contract,
the offeree or promisee bears the burden of proving the existence of a separate consideration
for the option.81 The offeree cannot rely on Article 1354 of the Civil Code,82 which presumes the
existence of consideration, since Article 1479 of the Civil Code is a specific provision on option
contracts that explicitly requires the existence of a consideration distinct from the purchase
price.83chanrobleslaw
In the present case, none of the above rules were observed. We find nothing in paragraph 5 of
the Agreement indicating that the grant to Lusteveco of the option to convert the purchase price
for Keppel shares was intended by the parties as the consideration for Keppel's option to buy the
land; Keppel itself as the offeree presented no evidence to support this finding. On the contrary,
the option to convert the purchase price for shares should be deemed part of the consideration
for the contract of sale itself, since the shares are merely an alternative to the actual cash price.
There are, however cases where, despite the absence of an express intent in the parties'
agreements, the Court considered the additional concessions stipulated in an agreement to
constitute a sufficient separate consideration for the option contract.
In Teodoro v. CA,84 the sub-lessee (Teodoro) who was given the option to buy the land assumed
.the obligation to pay not only her rent as sub-lessee, but also the rent of the sub-lessor (Ariola)
to the primary lessor (Manila Railroad Company).85 In other words, Teodoro paid an amount over
and above the amount due for her own occupation of the property, and this amount was found
by the Court as sufficient consideration for the option contract.86chanrobleslaw
In Dijamco v. CA,87 the spouses Dijamco failed to pay their loan with the bank, allowing the latter
to foreclose the mortgage.88 Since the spouses Dijamco did not exercise their right to redeem,
the bank consolidated its ownership over the mortgaged property.89 The spouses Dijamco later
proposed to purchase the same property by paying a purchase price of P622,095.00 (equivalent
to their principal loan) and a monthly amount of P13,478.00 payable for 12 months (equivalent
to the interest on their principal loan). They further stated that should they fail to make a
monthly payment, the proposal should be automatically revoked and all payments be treated as
rentals for their continued use of the property.90 The Court treated the spouses Dijamco's
proposal to purchase the property as an option contract, and the consideration for which was
the monthly interest payments.91 Interestingly, this ruling was made despite the categorical
stipulation that the monthly interest payments should be treated as rent for the spouses
Dijamco's continued possession and use of the foreclosed property.
At the other end of the jurisprudential spectrum are cases where the Court refused to consider
the additional concessions stipulated in agreements as separate consideration for the option
contract.
In Bible Baptist Church v. CA,92 the lessee (Bible Baptist Church) paid in advance P84,000.00 to
the lessor in order to free the property from an encumbrance. The lessee claimed that the
advance payment constituted as the separate consideration for its option to buy the
property.93 The Court, however, disagreed noting that the P84,000.00 paid in advance was
eventually offset against the rent due for the first year of the lease, "such that for the entire year
from 1985 to 1986 the [Bible Baptist Church] did not pay monthly rent."94 Hence, the Court
refused to recognize the existence of a valid option contract.95chanrobleslaw
What Teodoro, Dijamco, and Bible Baptist Church show is that the determination of whether the
additional concessions in agreements are sufficient to support an option contract, is fraught with
danger; in ascertaining the parties' intent on this matter, a court may read too much or too little
from the facts before it.
For uniformity and consistency in contract interpretation, the better rule to follow is that the
consideration for the option contract should be clearly specified as such in the option contract
or clause. Otherwise, the offeree must bear the burden of proving that a separate
consideration for the option contract exists.
Given our finding that the Agreement did not categorically refer to any consideration to support
Keppel's option to buy and for Keppel's failure to present evidence in this regard, we cannot
uphold the existence of an option contract in this case.
II. B. An option, though unsupported by a separate consideration, remains an offer that, if duly
accepted, generates into a contract to sell where the parties' respective obligations
become reciprocally demandable
The absence of a consideration supporting the option contract, however, does not invalidate an
offer to buy (or to sell). An option unsupported by a separate consideration stands as an
unaccepted offer to buy (or to sell) which, when properly accepted, ripens into a contract to
sell. This is the rule established by the Court en banc as early as 1958 in Atkins v. Cua Hian
Tek,96 and upheld in 1972 in Sanchez v. Rigos.97chanrobleslaw
Sanchez v. Rigos reconciled the apparent conflict between Articles 1324 and 1479 of the Civil
Code, which are quoted below:ChanRoblesVirtualawlibrary
Article 1324. When the offerer has allowed the offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by communicating such withdrawal, except when
the option is founded upon a consideration, as something paid or promised.
Article 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price, [emphases supplied]
The Court en banc declared that there is no distinction between these two provisions because
the scenario contemplated in the second paragraph of
Article 1479 is the same as that in the last clause of Article 1324.98 Instead of finding a
conflict, Sanchez v. Rigos harmonised the two provisions, consistent with the established rules of
statutory construction.99chanrobleslaw
Thus, when an offer is supported by a separate consideration, a valid
option contract exists, i.e., there is a contracted offer100 which the offerer cannot withdraw from
without incurring liability in damages.
On the other hand, when the offer is not supported by a separate consideration, the offer stands
but, in the absence of a binding contract, the offeror may withdraw it any time.101 In either case,
once the acceptance of the offer is duly communicated before the withdrawal of the offer, a
bilateral contract to buy and sell is generated which, in accordance with the first paragraph of
Article 1479 of the Civil Code, becomes reciprocally demandable.102chanrobleslaw
Sanchez v. Rigos expressly overturned the 1955 case of Southwestern Sugar v. AGPC,103 which
declared that
a unilateral promise to buy or to sell, even if accepted, is only binding if supported by a
consideration... In other words, an accepted unilateral promise can only have a binding effect if
supported by a consideration, which means that the option can still be withdrawn, even if
accepted, if the same is not supported by any consideration. 104 [Emphasis supplied]
The Southwestern Sugar doctrine was based on the reasoning that Article 1479 of the Civil Code
is distinct from Article 1324 of the Civil Code and is a provision that specifically governs options
to buy (or to sell).105 As mentioned, Sanchez v. Rigos found no conflict between these two
provisions and accordingly abandoned the Southwestern Sugar doctrine.
Unfortunately, without expressly overturning or abandoning the Sanchez ruling, subsequent
cases reverted back to the Southwestern Sugar doctrine.106 In 2009, Eulogio v Apeles107 referred
to Southwestern Sugar v. AGPC as the controlling doctrine108 and, due to the lack of a separate
consideration, refused to recognize the option to buy as an offer that would have resulted in a
sale given its timely acceptance by the offeree. In 2010, Tuazon v. Del Rosario-Suarez109 referred
to Sanchez v. Rigos but erroneously cited as part of its ratio decidendi that portion of the
Southwestern Sugar doctrine that Sanchez had expressly abandoned.110chanrobleslaw
Given that! the issue raised in the present case involves the application of Article 1324 and 1479
of the Civil Code, it becomes imperative for the Court [en banc] to clarify and declare here which
between Sanchez and Southwestern Sugar is the controlling doctrine.
The Constitution itself declares that "no doctrine or principle of law laid down by the court in a
decision rendered en banc or in division may be modified or reversed except by the court
sitting en banc.111Sanchez v. Rigos was an en banc decision which was affirmed in 1994
in Asuncion v. CA,112also an en banc decision, while the decisions citing the Southwestern
Sugar doctrine are all division cases.113 Based on the constitutional rule (as well as the inherent
logic in reconciling Civil Code provisions), there should be no doubt that Sanchez v.
Rigos remains as the controlling doctrine.
Accordingly, when an option to buy or to sell is not supported by a consideration separate from
the purchase price, the option constitutes as an offer to buy or to sell, which may be withdrawn
by the offeror at any time prior to the communication of the offeree's acceptance. When the
offer is duly accepted, a mutual promise to buy and to sell under the first paragraph of Article
1479 of the Civil Code ensues and the parties' respective obligations become reciprocally
demandable.
Applied to the present case, we find that the offer to buy the land was timely accepted by
Keppel.
As early as 1994, Keppel expressed its desire to exercise its option to buy the land. Instead of
rejecting outright Keppel's acceptance, PNOC referred the matter to the Office of the
Government Corporate Counsel (OGCC). In its Opinion No. 160, series of 1994, the OGCC opined
that Keppel "did not yet have the right to purchase the Bauan lands."114 On account of the OGCC
opinion, the PNOC did not agree with Keppel's attempt to buy the land;115 nonetheless, the PNOC
made no categorical withdrawal of the offer to sell provided under the Agreement.
By 2000, Keppel had met the required Filipino equity proportion and duly communicated its
acceptance of the offer to buy to PNOC.116 Keppel met with the board of directors and officials of
PNOC who interposed no objection to the sale.117 It was only when the amount of purchase price
was raised that the conflict between the parties arose,118 with PNOC backtracking in its position
and questioning the validity of the option.119chanrobleslaw
Thus, when Keppel communicated its acceptance, the offer to purchase the Bauan land stood,
not having been withdrawn by PNOC. The offer having been duly accepted, a contract to sell the
land ensued which Keppel can rightfully demand PNOC to comply with.
III. Keppel's constitutional right to acquire full title to the land
Filipinization is the spirit that pervades the constitutional provisions on national patrimony and
economy. The Constitution has reserved the ownership of public and private lands,120 the
ownership and operation of public utilities,121 and certain areas of investment122 to Filipino
citizens, associations, and corporations. To qualify, sixty per cent (60%) of the association or
corporation's capital must be owned by Filipino citizens. Although the 60% Filipino equity
proportion has been adopted in our Constitution since 1935, it was only in 2011 that the Court
interpreted what the term capital constituted.
in Gamboa, the Court prospectively applied its ruling, thus enabling the public utilities to meet
the nationality requirement before the Securities and Exchange Commission commences
administrative investigation and cases, and imposes sanctions for noncompliance on erring
corporations.128 In this case, Keppel must be allowed to prove whether it meets the required
Filipino equity ownership and proportion in accordance with the Gamboa ruling before it can
acquire full title to the land.
In view of the foregoing, the Court AFFIRMS the decision dated 19 December 2011 and the
resolution dated 14 May 2012 of the CA in CA-G.R. CV No. 86830 insofar as these rulings uphold
the respondent Keppel Philippines Holdings, Inc.'s option to buy the land, and REMANDS the
case to the Regional Trial Court of Batangas City, Branch 84, for the determination of whether the
respondent Keppel Philippines Holdings, Inc. meets the required Filipino equity ownership and
proportion in accordance with the Court's ruling in Gamboa v. Teves, to allow it to acquire full
title to the land.
SO ORDERED.cha

In Gamboa v. Teves,123 the Court declared that the "legal and beneficial ownership of 60 percent
of the outstanding capital stock must rest in the hands of Filipino nationals." 124 Clarifying the
ruling, the Court decreed that the 60% Filipino ownership requirement applies separately to
each class of shares, whether with or without voting rights,125 thus:ChanRoblesVirtualawlibrary
Applying uniformly the 60-40 ownership requirement in favour of Filipino citizens to each class of
shares, regardless of differences in voting rights, privileges and restrictions, guarantees effective
Filipino control of public utilities, as mandated by the Constitution.126
Although the ruling was made in the context of ownership and operation of public utilities, the
same should be applied to the ownership of public and private lands, since the same proportion
of Filipino ownership is required and the same nationalist policy pervades.

The uncontested fact is that, as of November 2000, Keppel's capital is 60% Filipino-
owned.127 However, there is nothing in the records showing the nature and composition of
Keppel's shareholdings, i.e.,whether its shareholdings are divided into different classes, and 60%
of each share class is legally and beneficially owned by Filipinos - understandably because when
Keppel exercised its option to buy the land in 2000, the Gamboa ruling had not yet been
promulgated. The Court cannot deny Keppel its option to buy the land by retroactively applying
the Gamboa ruling without violating Keppel's vested right. Thus, Keppel's failure to prove the
nature and composition of its shareholdings in 2000 could not prevent it from validly exercising
its option to buy the land.

Nonetheless, the Court cannot completely disregard the effect of the Gamboa ruling; the 60%
Filipino equity proportion is a continuing requirement to hold land in the Philippines. Even